24 September, 2013

Soon after the Bharatiya Janata Party named Gujarat Chief Minister
Narendra Modi as its prime ministerial candidate, noted Indian writer
and educationist UR Ananthamurthy said he wouldn’t live in a country
ruled by him.

Ananthamurthy was voicing his concern over the
nomination of Modi, who bears the stigma of facilitating the anti-Muslim
riots of 2002, for the high office by the main opposition party. In an
orchestrated response to his remark, Modi fans started sending him money
orders to buy a one-way ticket to fly out of the country. Several other
writers immediately rallied to his defence.

The episode is
indicative of the secular sections’ misgivings over Modi’s emergence on
the national scene and the Hindutva camp’s scant regard for their
concerns as it plays for high stakes.

The BJP heads the National
Democratic Alliance, which ruled the country from 1998 to 2004 and is
the main opposition in Parliament. It is approaching next year’s
elections with high hopes as the ruling United Progressive Alliance, led
by the Congress, will be facing the electorate with the burden of
double incumbency and grave corruption charges. Having lost two
successive elections, the BJP desperately needs a win.

The
Rashtriya Swayamsevak Sangh, Hindutva’s ideological powerhouse, had
planned to declare Modi its prime ministerial nominee last June. It
could not accomplish the mission then as Lal Kishen Advani, the party’s
tallest leader after former prime minister Atal Behari Vajpayee and the
chairman of the NDA, remonstrated. As a first step, it made Modi the
party’s chief campaigner. This month, it proclaimed him prime
ministerial nominee.

Criticism from outside the party
notwithstanding, Modi appears to be the best candidature the BJP could
find. Advani had led the party unsuccessfully in the elections of 2004
and 2009, and, at 85, age was clearly against him. None of the other
leaders at the national level could claim to be his natural successor.
Among the state-level leaders, Modi was the one with the most national
exposure, even if he received attention for the wrong reasons.

The
BJP has been declining continuously for years, and Modi faces an uphill
task. Its popularity peaked in 1998 when, with a poll share of 25.59
per cent, it secured 182 seats in the Lok Sabha and emerged, for the
first time, as the largest party in the House. This enabled it to
attract a number of small parties and cobble up enough support to form
the first NDA government.

The Congress party bagged 25.82 per cent of the votes polled in that election but got only 141 seats.

When
fresh elections were called in 1999 following the collapse of the NDA
government, the BJP’s vote share dropped to 23.75 per cent but it
managed to maintain its strength of 182 seats and retained power. The
Congress party’s vote share went up to 28.30 per cent but the vagaries
of the electoral system restricted its strength in the House to 114
seats.

After the second NDA government completed its five-year
term, the BJP went to the polls with the catchy slogan “India Shining”
but was rebuffed by the electorate. Its vote share fell to 22.16 per
cent and the number of seats dwindled to 138. The Congress party’s vote
share fell too, to 26.53 per cent, but its Lok Sabha strength rose to
145, making it once again the largest single party in the house.

In
2009, the BJP’s poll share fell further to 18.80 per cent. Modi has to
reverse the declining trend and push up the party’s vote share. A rise
of five percentage points can take it back to the 1999 level and
possibly once again make it the largest party in the Lok Sabha.

However,
the party cannot expect a replication of the old scenario. During
1998-99 it could draw towards it many small parties since they disliked
the Congress more than they disliked it. Besides, in Vajpayee it had a
leader who had a wide measure of acceptability across the political
spectrum.

The first thing Modi did on taking charge of the
party’s election campaign was to dispatch his close associate, Amit
Shah, to Uttar Pradesh, which has the largest bloc of 80 seats in the
Lok Sabha. In 2009 the BJP won only 10 seats there, and was way behind
the Samajwadi Party (23 seats), the Congress (20) and the Bahujan Samaj
Party (20).

This month 48 persons were killed in
communal riots in the Muzaffarnagar district of UP. The Congress and the
Left parties have attributed the violence to the BJP strategy of
communally polarising the society ahead of the election. Such a strategy
may help win more seats but render the task of forging post-election
alliances difficult by reviving memories of Gujarat 2002.--Gulf Today, Sharjah, September 24, 2013.

17 September, 2013

India’s democratic system has facilitated multi-party elections at
regular intervals and changes of government at the Centre and in the
states through the ballot. However, it has its flaws, which are crying
for remedy.

The emergence of money and muscle power as elements
that can influence the outcome of elections has led to a rise in the
number of persons with criminal records in the two houses of parliament
and in the state legislatures.

The Association for Democratic
Reforms (ADR) and the National Election Watch (NEW), which studied
affidavits filed by candidates who have sought elections since 2004,
found that about 30 per cent of the members of the Lok Sabha and 17 per
cent of the members of the Rajya Sabha had criminal cases pending
against them when they filed their nomination papers. Some were charged
with heinous crimes like murder, kidnapping and rape.

In an
attempt to check the rise of criminal elements in elected bodies, the
Supreme Court recently ruled that a member will forfeit his seat
immediately if he or she is convicted on a charge that attracts a jail
term of two years or more.

The law provides for such forfeiture
but until now the court had, as a rule, suspended the sentence and
allowed the convicted member to retain his seat pending a decision on
his appeal.

The government considered amending the law to
overcome the effect of the judgement, but gave up the idea after the
apex court indicated that it is not inclined to revise its decision in
the matter.

In another recent judgement, the Supreme Court ruled
that a person in lawful custody cannot contest elections. While its
intention was good, the ruling opened the way for a government which is
not scrupulous in observing democratic niceties to vitiate the electoral
process by throwing opposition leaders in jail on trumped-up charges on
the eve of the elections.

While addressing the Kerala Assembly
on the occasion of its 125th anniversary a few days ago (the state came
into being only in 1956 but its legislature traces its history to the
setting up of an assembly in the princely state of Travancore before
Independence), Vice-President Hamid Ansari dwelt on another grave
weakness of the country’s democratic system. He pointed out that the
first-past-the-post system often results in candidates getting elected
with the support of not more than a quarter or one-third of the voters.

The
flawed electoral system, borrowed from the British, casts doubts on the
representative capacity of not only individual legislators but also the
elected bodies. The fact is that no government in the country’s history
enjoyed the support of a majority of the electorate. The massive
majority that the Congress won in the first three general elections,
fought under the leadership of Jawaharlal Nehru, arguably the most
popular of all prime ministers, was secured with vote shares ranging
from 44.72 per cent to 47.78 per cent.

The system allowed the
undivided Communist Party of India with a vote share of only 3.79 per
cent to win 16 seats and emerge as the largest opposition group in the
first Lok Sabha, edging past the Socialist Party which could get only 12
seats with its 10.59 per cent votes. In 1984, a regional party, Telugu
Desam of Andhra Pradesh, became the main opposition in Parliament
winning 30 of the state’s 40 Lok Sabha seats.

Electoral systems
designed to ensure that the government and individual legislators have
the support of a majority of the electorate are now in force in many
countries. The most popular one involves a runoff between the two
candidates who receive the largest number of votes in the initial
ballot.

While there have been cursory discussions on electoral
reform from time to time, political parties in the country have little
interest in improving the system as they have developed a vested
interest in the present arrangement.

Parties with narrow bases
stand to benefit from the first-past-the-post principle. When votes in a
constituency get widely splintered in a multi-cornered contest a small
but significant caste, religious or class vote bank can help a party to
win.

All national parties have suffered erosion in
their geographical base in the past few years and regional parties have
come to the fore. The support base of both national and regional parties
is narrow and they are, therefore, heavily dependent upon vote banks.--Gulf Today, September 17, 2013.

10 September, 2013

India’s economic woes were uppermost in Prime Minister Manmohan
Singh’s mind when he went to St Petersburg, Russia, for the G20 meet
last week. His plea to the developed countries for calibration of their
monetary policies to avoid adverse impact on the economies of the
developing countries received support from many countries.

Heeding
their voice, the United States and other advanced economies agreed in
the summit declaration to carefully manage winding down of the monetary
stimulus, brought in to deal with the situation created by the global
economic slowdown.

At the root of the worry articulated by
Manmohan Singh was the depreciation of the currencies of some developing
countries as global investors started pulling out following reports
that the US Federal Reserve may taper off its monthly $85 billion bonds
purchase.

While committing itself to moderate the Fed’s
quantitative easing programme, the US argued that the difficulties of
the developing countries were the result of lack of economic reforms.
This viewpoint, too, found expression in the declaration which said
“sound macroeconomic policies, structural reforms and strong prudential
frameworks will help address an increase in volatility”.

As was
to be expected, the declaration represents a balancing act. The G20
nations undertook to co-operate to ensure that the policies they
implemented to support domestic growth also supported global growth and
financial stability and to manage their spillovers on other countries.

US
officials claimed later that while China, India and Brazil raised the
issue of quantitative easing, most G20 members agreed that what was good
for the US was good for the global economy.

The G20 nations
reiterated their commitment to free trade. At the same time, the target
date for ending the moratorium on any new protectionist measures was
moved from 2014 to 2016.

There was a consensus in favour of
adoption of an action plan which focuses on economic growth and job
creation. However, the details remain to be worked out. The member
states have been asked to outline their respective positions on the
subject at next year’s summit, to be held in Brisbane, Australia.

Another
positive outcome of the summit was the agreement to create an
international framework to fight cross-border tax evasion by 2015. The
proposal requires financial institutions to ascertain the residential
status of their customers for tax purposes and pass on the information
to the authorities concerned.

The US and Britain were among the
key promoters of the proposal. Apple, America’s most profitable
technology company, is said to have avoided billions in taxes in the US
as well as other countries by creating a web of subsidiaries. Another
American company, Starbucks, which runs a global coffee house chain, had
sales of nearly $630 million in Britain last year but paid no taxes. It
has, however, offered to pay taxes from this year.

Curiously,
the proposal to check tax evasion did not receive much attention in
India though the country stands to benefit from the proposed
international framework. Global Financial Integrity, a non-profit
research organisation, had reported last year that Indians were holding
an estimated $500 billion in secret accounts in foreign banks.

Manmohan
Singh can derive some satisfaction from the fact that he could persuade
the developed nations to take note of the adverse implications of the
high volatility of financial flows and exchange rates for India’s
economic stability. However, he obtained more tangible results from the
discussions he had with some of the summit participants outside the
conference hall.

In talks held on the sidelines of the summit,
Japan agreed to raise the ceiling on the currency swap agreement with
India from $15 billion to $50 billion. This will strengthen India’s
effort to arrest the decline of the rupee.

The BRICS
deliberations at St Petersburg resulted in agreement on the
contributions members of the group must make towards the reserves of the
100-billion dollar development bank which they are to set up. China
will provide $41 billion, Brazil, Russia and India $18 billion each and
South Africa $5 billion.

The BRICS bank is designed to help
finance infrastructure and development projects in the member nations.
It will also pool foreign currencies to help meet any financial crisis
in the future. Some see it as an alternative to the International
Monetary Fund, where the US is in a position to veto any proposal.-- Gulf Today, Sharjah, September 10, 2013.

03 September, 2013

With the rupee in free fall, the stock market in violent fluctuation and
inflation in two digits, last week threw up evidence that India’s
economy is ailing.

While presenting the budget, Finance Minister P
Chidambaram had held out hopes of a growth rate of 6.1 to 6.7 per cent during
this year. Replying to a debate on the state of the currency in the
upper house of Parliament on Friday, Prime Minister Manmohan Singh
lowered the target to 5.5 per cent. Data released by the Central
Statistical Organisation later shows even this may be unrealistic.

The
CSO report said growth in the first quarter of the fiscal was only 4.4
per cent, the lowest since the global meltdown of 2009. The growth rate
fell in every sector of the economy except that of social and personal
services, which registered an increase — from 8.9 per cent to 9.4 per
cent.

Some foreign analysts and domestic critics cited the Food
Security Bill, which provides for heavy subsidy on grains supplied to
the poor, as one of the reasons for the decline of the rupee. The fact,
however, is that the rupee began falling weeks before the bill was
adopted by the lower house of Parliament, and it was caused primarily by
global investors moving money out of foreign financial markets
following the US move to tighten money policy in view of improvement in
its economy.

The economies of many countries had suffered when
the US experienced meltdown a few years ago. It is ironic that some of
them now suffer because the US economy is improving.

The rupee
is not the only currency affected by outflow of foreign investment. The
currencies of many developing countries from Brazil to Indonesia have
suffered erosion in recent weeks. However, the rupee happens to be the
worst hit.

India received foreign institutional investment of $12
billion this year. About $1 billion went out in a fortnight as
investors began pulling out.

The main cause of the plight of the
rupee is the growth in the current account deficit — the gap between the
value of imports and that of exports — which touched an all-time high
of $88.2 billion during the last financial year. This was 4.8 per cent
of the GDP. The government planned to reduce the CAD to $70 billion, or
3.7 per cent of the GDP, this year. High oil and gold imports foiled its
efforts.

Appeals to the public to reduce oil and gold
consumption having failed, the government is considering other remedial
measures. Buying more oil from Iran paying rupees and keeping petrol
outlets closed from 8pm to 8am are among the ideas mooted to reduce oil
import bill. Austerity measures are also envisaged.

Some analysts
have likened the current situation to what prevailed in the early 1990s
when India borrowed heavily from the International Monetary Fund and
suggested going back to the IMF. However the government says the
situation does not warrant recourse to IMF aid.

Its optimism is
based mainly on two factors. One is that the country has foreign
exchange reserves of about $280 billion as against short-term debts of
about $172 billion. The other is that since there was plentiful rain
during the year the outlook on the farm front is bright.

However,
Corporate India has cause for worry. Taking advantage of the economic
reforms, many companies borrowed heavily from abroad and the falling
rupee has pushed up their repayment burden.

A US website has
quoted an official of the financial services firm Morgan Stanley as
saying 25 per cent of Indian companies technically do not have enough
money to make interest payments and 15 per cent have negative cash
flows.

Manmohan Singh shares Corporate India’s view that the
answer to the current economic problems lies in more reform. However,
since general elections are approaching, he cannot overlook the fact
economic reform, while benefiting big corporations, has added to the
misery of the poor. The food security and land acquisition measures
which the government is trying to push through are aimed at mitigating
its impact on the vulnerable sections of the population.

Amid
the gloom of the week the state-owned Life Insurance Corporation spread a
bit of cheer by releasing a report of the global research firm Dun and
Bradstreet, which said India is likely to achieve an average growth rate
of over 8.3 per cent between 2014 and 2020 and realise its full
potential. -- Gulf Today, Sharjah, September 3, 2013.